May farm credit disbursement falls 7.13pc

The disbursement of agricultural loans dropped by nearly 7.13 per cent in May 2024 from that of April, reveals data available with the Bangladesh Bank (BB).
However, credit disbursement witnessed a 13.65-per cent increase year on year during the July-May period of fiscal year (FY) 2023-24 than the preceding period of the previous fiscal.
According to the BB data, agricultural and rural credit rose to Tk 332.96 billion during the July-May period of FY24 from Tk 292.97 billion of FY2022-23.
Until May, the outstanding balance with interest on such loans reached Tk 563.31 billion, marking a spike of 10.32 per cent than the same period in FY23.
The outstanding balance of farm credit was more than Tk 510.64 billion during the July-May period of FY23, according to the central bank data.
On the other hand, credit recovery was recorded at Tk 323.75 billion in the period under review. It was 7.56 per cent higher than the same period of last FY.
Such recovery reached more than Tk 301 billion during the same period of last FY.
Dr M Masrur Reaz, chairman and CEO of Policy Exchange of Bangladesh, observed that the decline in farm loans in May might be linked to the crop cycle pattern.
Due to higher supply chain costs and inflation, according to him, farmers have been taking out larger loans to cover their production costs.
Consequently, there was an increase in farm loans from July to May, remarked Dr Reaz.
He emphasised the importance of boosting domestic agricultural production to ensure food security for a population of more than 170 million.
Dr Reaz suggested maintaining a steady food supply and agricultural output, pointing out that farm loans play a vital role in achieving this goal.
Apart from this, he also called for ensuring a consistent supply of agricultural inputs to support normal farming operations.
On 22 May 2022, the BB asked the banks to lend at a concessional rate of 4.0 per cent, especially for import-substitute crops like pulses, oilseed, spices and maize.
Farmers availed loans amounting to Tk 328.29 billion in FY23. Their repayments totalled Tk 330.10 billion.
The majority of these loans were facilitated through non-governmental organisations (NGOs).
Farmers accessed loans from banks at a lending rate of 8.0 per cent, whereas loans acquired through NGOs carried higher rates ranging from 24 per cent to 30 per cent.
Due to inherent challenges faced by banks in directly reaching farmers at grass-roots level, they channel loan disbursements through NGOs, which, in turn, disburse the funds at elevated interest rates.

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